Economists Warn Tariffs On Imported Steel Could Spark Trade War

President Trump is back in the U.S. after a quick trip to France, where he celebrated Bastille Day and a hundred years since the U.S. entered World War I. Along the way, the president hinted to reporters he is weighing new limits on imported steel. Critics are warning that could trigger a worldwide trade war, as NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Steel has a special place in this president's heart. Trump often spoke on the campaign trail about revitalizing steel mills and other heavy industries, a theme he picked up again at the Transportation Department last month.

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PRESIDENT DONALD TRUMP: Watch new sparks light our factories as we forge metal from the furnaces of our Rust Belt and our beloved heartland which has been forgotten. It's not forgotten anymore.

HORSLEY: The domestic steel industry has been struggling. Scott Paul is with the Alliance for American Manufacturing, which represents steelmakers and the Steelworkers union. He says over the last three years, the U.S. has lost some 15,000 steelmaking jobs.

SCOTT PAUL: It's not because they don't know how to make steel or they don't know how to make it profitably. They certainly do. But they've been faced with a wave of imports, many of which have been dumped or subsidized by government-run steel industries.

HORSLEY: Commerce Secretary Wilbur Ross puts much of the blame for that wave of cheap imports on China. That country operates far more steel mills than it needs to supply its own demand. Ross says the glut of excess Chinese steel depresses prices and idles mills all over the world.

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WILBUR ROSS: So it's a very serious impact on the domestic industry. The domestic industry is only operating at about 71 percent of capacity.

HORSLEY: During his flight to Paris this week, Trump complained the U.S. has become a dumping ground for imported steel, and he vowed to put a stop to it by imposing quotas, tariffs or both. That would be a welcome move for the steelworkers that Scott Paul represents.

PAUL: If the president is true to his word, the relief will be robust.

HORSLEY: But that's a big if. The president's push for new limits on steel imports is reportedly being hotly debated within the White House itself.

DOUG HOLTZ-EAKIN: Any decision made by the president of the United States is a hard decision. The easy ones don't get to the president.

HORSLEY: That's Doug Holtz-Eakin, a former White House economist who now leads a conservative advocacy group called the American Action Forum. He drafted a letter to the president opposing a crackdown on imported steel, and he got 15 economists who served both Republican and Democratic presidents to sign on.

HOLTZ-EAKIN: People say economists can't agree on anything. And this is a bipartisan agreement on a very simple question. So it was nice to see.

HORSLEY: Holtz-Eakin says while slapping tariffs or quotas on imported steel might help American steelmakers, it would hurt the U.S. companies that use steel and their customers. The import limits would hit not only China but other big suppliers such as Canada, Mexico and South Korea. And many other countries would likely retaliate with restrictions of their own on U.S. exports.

HOLTZ-EAKIN: Europeans have already singled out where they will retaliate, and people know about it. So there are already constituencies in the U.S. who are worried they'll get caught in the crossfire of this decision.

HORSLEY: U.S. dairy products, orange juice and Kentucky bourbon could all be targets in such a trade war. But Scott Paul says there's also a political calculation as the White House weighs how to deliver for the downtrodden workers who helped put Trump in the White House.

PAUL: We saw a lot of this pain borne out over the last election cycle in these small mill towns that dot our country's landscape in states like Pennsylvania and Ohio. And it's more than a steelworker's job. It becomes about the community and the social fabric, and it had a direct bearing on our politics.

HORSLEY: Thus far, the president has talked more about protectionist measures than he's actually done. His decision on steel imports when it comes will help show whether that's changing. Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.